Growth in the Middle East and North Africa is forecasted to average 4.2 percent in 2015, the World Bank reported in its latest Middle East and North Africa Economic Monitor, released Wednesday.
“The violent conflicts in Syria, Iraq, Gaza, Yemen and Libya with their spillovers to Lebanon and Jordan could make MENA’s economic prospects bleak,” the report quoted Inger Andersen, World Bank Regional Vice President for the Middle East and North Africa, as saying.
A more optimistic scenario based on an increase in public and private consumption from expansionary fiscal policies, easing political tensions crowding-in investments in Egypt and Tunisia, continued subsidy reforms in Egypt, Jordan and Yemen, and a resumption of oil production in Libya, puts growth at 5.2 percent in 2015.
Given the latter scenario, growth is projected to pick up to 2 percent in Lebanon, 3.1 percent in Egypt, 2.7 percent in Tunisia and 4.6 percent in Morocco, while it will average 2-3 percent in Algeria and Iran, according to World Bank figures.
The intensification of the civil war in Syria and the continued influx of refugees have adversely affected Lebanon’s economy, which is not expected to grow by more than 1.5 percent in 2014, the report said.
The World Bank forecast Lebanon’s overall fiscal deficit to widen to 10.2 percent of GDP in 2014, compared to 9.4 percent during the previous year, while the primary balance will register a deficit for the third consecutive year, increasing by a projected 0.7 percentage points to 1.2 percent of GDP.
As a result, gross public debt will rise to a forecast 149 percent of GDP in 2014, compared to 143.1 percent of GDP at end-2013. The current account deficit is forecasted to reach 8.3 percent of GDP in 2014, in line with the previous two years.
An average of 3 percent growth in the MENA region is forecast in 2014, however, a big gap separates oil-producing and developing countries, according to the World Bank report.
Developing countries are expected to grow at 0.7 percent, a bit faster than last year’s 0.4 percent, while oil-producing countries had a projected growth rate of 4.9 percent in 2014.
In oil-producing countries, GDP growth is forecast to average 5 percent in 2015.
However, the report noted that high-income countries faced structural problems that might constrain their growth in the future.
“While they have been running fiscal surpluses, the high levels of subsidies and public sector wage bill mean that the price of oil at which their budgets are balanced is quite high. In fact, given current projections for the price of oil next year, budget surpluses are expected to disappear in Saudi Arabia and shrink in half in Qatar,” the report said.
Energy subsidies have also contributed to challenges pertaining to high unemployment, urban air pollution and severe water scarcity that is undermining agriculture, the report warned. It added that emerging evidence supported a positive relationship between fuel prices and per-capita GDP growth, job creation and performance of transport and water sectors.
“Energy subsidies and restricted competition encourage capital-intensive production, thus discouraging labor and employment, and contributing to the high unemployment in the region,” the report quoted Shanta Devarajan, World Bank chief economist for the Middle East and North Africa region, as saying.
“With higher energy prices, resources would shift toward light manufacturing, construction and other labor-intensive sectors, as well as toward younger, more dynamic firms.”
